Microsoft issued a serious warning: sell these 3 data center stocks

Artificial intelligence has brought a huge boom in demand for data centres, leading to massive investments in infrastructure. However, recent moves by Microsoft suggest that this growth may not be as limitless as investors have previously thought. In fact, Microsoft has cancelled several data centre leases in the US, raising concerns about future demand for AI infrastructure and the overall slowdown in the data centre market.

According to TD Cowen, Microsoft recently cancelled several data center leases in the US. Analysts said the tech giant terminated agreements with "at least two private data center operators," freeing up several hundred megawatts of capacity. This has led to broader concerns about whether demand for AI computing infrastructure will slow in the long term. However, Microsoft said it remains committed to investing more than $80 billion in capital expenditure, although it may strategically adjust its plans.

Digital Realty Trust $DLR

Digital Realty Trust is one of the most prominent global providers of data center and cloud solutions. The company operates an extensive network of data centers and offers colocation and connectivity services for enterprises and technology companies. Still, DLR stock has come under pressure in 2024, in part due to concerns related to lease cancellations by Microsoft.

The company posted mixed results for the latest quarter. Total revenue rose 5.1% year-over-year to $1.44 billion, but fell short of analysts' expectations. The outlook for 2025 was also below market expectations, adding to uncertainty about future growth. Still, Digital Realty is showing steady demand for its services, suggesting a solid foundation for long-term growth.

Vistra $VST

Vistra is one of the largest energy companies in the US with approximately 41 GW of capacity. The company operates a wide range of power plants including nuclear, gas, coal and solar. Vistra has profiled itself as a key energy supplier to the growing data center segment in recent years, which has led to strong growth in its market value.

The year 2024 was an extremely successful one for Vistra, with its shares reaching all-time highs. However, in early 2025, the company experienced significant volatility and its share price fell by 10%. In addition to uncertainty about future demand for AI data centers, the decline in overall revenue growth expectations in 2025 also played a role. Thus, despite a strong balance sheet and liquidity, Vistra finds itself in a period of heightened uncertainty.

Equinix $EQIX

Equinix is one of the largest global data center operators with a market capitalization of $88 billion. The company manages 268 data centers worldwide and specializes in digital infrastructure and business-to-business connectivity. Equinix has benefited significantly in recent years from the growing demand for AI and cloud solutions.

Despite its long-term stability, Equinix faces new challenges, including increasing competition and the need to upgrade older data centers. The company posted mixed results in February 2025, with fourth-quarter revenue growth of 7.1%. However, revenue growth for 2025 was lower than originally expected. This has led to a decline in the value of EQIX stock of approximately 4% since the beginning of the year.

TD Cowen's report on the possible slowdown in data center demand growth thus raises questions about the future of the industry. Although companies such as Digital Realty, Vistra and Equinix continue to benefit from strong demand for digital infrastructure, they will need to adapt their strategies to new market conditions and changes in the investment plans of large technology firms.

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Source: Barchart